f^O  ^  E  I  C-  N      T^  A  D  £ 
APR  211966 

Combining  for  Foreign  Trade 

UNTVERSITY  OP  CALIFORNIA 
SA^TA   BARBARA         ^ 
INFORMATION  FILE 


/    / 


1  i,-r;r:J.    F,  »     »•• 


Guaranty  Trust  Company 
of  New  York 


Combining  for  Foreign  Trade 

Plans  and  Methods  of  Operation 


Guaranty  Trust  Company  of  New  York 


140  Broadway 


FIFTH  AVENUE  OFFICE  MADISON  AVENUE  OFFICE 

Fifth  Avenue  and  43rd  Street  Madison  Avenue  and  60th  Street 

LONDON    OFFICES  LIVERPOOL      OFFICE 

32      Lombard      Street.    E.    C.  27  Cotton  Exchange  BuUdings 

5  Lower  Grosvenor  PL,  P.  V. 

PARIS       OFFICE                 II   A  V    R   E     O   F   F  I   C  E                 BRUSSELS     OFFICE 

1      &     3      Rue       lie*      Italiens                   122  Boulevard       Strasbourg                   158      Rue      Royale 


COPYHIGHT,   1920,    BY 
GUARANTY  TRUST  COMPANY  OF  NEW  YORK 


Foreword 


THE  information  contained  in  this 
booklet  has  been  recorded  as  the 
result  of  actual  experience  in  aiding  the 
formation  of  combinations  under  the 
Webb-Pomerene  Law.  It  is  presented 
with  the  idea  that  specific  data  and  de- 
tailed information,  together  with  a  dis- 
cussion of  plans  of  organization,  based 
on  actual  developments,  may  be  helpful 
to  those  who  are  seeking  a  solution  of 
some  of  the  more  difficult  problems  of 
collective  selling. 

Legal  opinion  is  not  agreed  as  to  the 
alleged  limitations  of  the  Webb  Law. 
Business  men,  however,  have  been  proceed- 
ing on  the  understanding  that  whatever 
restrictions  are  discovered  as  hindering  the 
legitimate  development  of  foreign  trade 
will  be  removed  by  Congress  as  experience 
proves  the  necessity  for  amendment  of 
the    Law.     The   Government   desires   to 


foster  our  foreign  trade  activities  in  every 
w^ay  possible,  and  when  privileges  are 
not  abused,  and  existing  domestic  laws  are 
not  wilfully  violated,  very  definite  en- 
couragement is  likely  to  be  granted  to 
groups  of  exporters  who  seek  to  establish 
our  products  in  all  parts  of  the  world  on 
a  plane  compatible  with  the  highest  stand- 
ards of  American  business. 

The  services  of  the  Guaranty  Trust 
Company  of  New  York  frequently  have 
been  employed  in  this  field  in  counselling 
the  members  of  new  foreign  trade  organi- 
zations, and  have  been  and  are  entirely 
gratuitous.  No  obligation  of  any  kind  is 
involved.  It  is  a  matter  of  public  service, 
rendered  in  the  belief  that  whatever  serves 
to  expand  the  country's  trade  will,  in  the 
long  run,  be  of  benefit  to  all  and  help 
sustain  the  national  prosperity. 


Combining  for  Foreign  Trade 

Plans  and  Methods  of  Operation 


THE  Webb-Poinerene  Law,  permitting 
combinations  in  export  trade,  has 
now  been  in  force  for  more  than  twelve 
months.  During  this  period  one  hundred 
and  one  organizations  have  filed  papers 
with  the  Federal  Trade  Commission 
for  the  purpose  of  taking  advantage  of  the 
provisions  of  the  Law. 

Not  all  of  these  organizations  have  com- 
plied with  the  essential  requirements  of 
the  law.  Some  trading  agencies  have 
registered  with  the  idea  that  it  might  be 
safest  so  to  do  as  an  aid  to  contemplated 
expansion  of  effort,  without,  in  the  mean 
time,  representing  any  organization  of 
competing  interests. 

There  is,  however,  a  rapidly-growing 
number  of  well-planned  organizations 
in  which  American  manufacturers  and 
producers  have  combined  to  promote  their 
sales  in  foreign  countries.  These  include 
five  different  groups  of  lumber  producers, 
groups  representing  steel,  copper,  pack- 
ing, textiles,  paper,  cement,  chemicals, 
phosphate,  magnesia,  tanning,  office  equip- 
ment, wooden  ware,  webbing,  sash,  door, 
and  millwork  supplies,  foundry  equip- 
ment, etc.  Combinations  in  coal,  electri- 
cal supplies,  hosiery,  builders'  hardware, 
packing  (additional  groups),  furniture, 
steel  specialties,  musical  instruments, 
railroad  supplies,  machine  tools,  stoves, 
machinery,  carpets  and  rugs,  paints,  tan- 
ning, converters,  and  other  industries  are 
under  way. 

Questions  of  Adaptation 

Leading  manufacturers  in  numerous 
competing  industries,  and  from  all  parts 
of  the  country,  desiring  to  act  jointly  and 
to  take  advantage  of  the  provision  of  the 


Webb-Pomerene  Law,  have  approached 
the  task  by  appointing  a  committee  to 
study  the  subject  of  "cooperative  effort 
in  foreign  trade,"  and  to  draft  a  plan  for 
the  approval  of  all  concerned.  Frequently 
this  has  been  done  through  the  trade  asso- 
ciation in  which  the  majority  of  manu- 
facturers in  the  industry  are  represented. 
Often  the  chairmen  of  such  committees 
have  written  to  the  Guaranty  Trust  Com- 
pany of  New  York,  asking  for  guidance  and 
suggesting  that  we  send  copies  of  agree- 
ments of  combinations  already  formed,  or 
outline  the  basis  upon  which  other  groups 
of  manufacturers  have  gotten  together. 

We  have  however  not  found  it  prac- 
ticable to  serve  anyone  in  precisely  this 
way.  There  is  no  "rule  of  three"  by 
which  any  selling  organization  for  export 
trade  can  be  put  together.  The  funda- 
mentals may  be,  indeed,  are,  the  same 
in  regard  to  many  of  the  commercial 
factors  to  be  considered,  but  the  technique 
of  organization  is  largely  contingent 
upon  conditions  which  are  peculiar  to 
each  industry'.  The  details  are  important; 
and  no  group  of  would-be  exporters  faces 
exactly  the  same  problems  when  all  the 
items  relating  to  the  nature  of  the  product, 
domestic  methods  of  production,  sale  and 
distribution,  number  of  probable  par- 
ticipants in  the  combine  and  the  indi- 
vidual experience — or  non-experience — 
in  export  trade,  are  taken  into  considera- 
tion. The  domestic  problems  of  each  in- 
dustry have  to  be  analyzed  first,  and  the 
conditions  of  manufacture  studied. 

Different  Types  of  Selling  Organizations 

There  are  three  types  of  selling  organ- 
izations which,  with  variations  to   meet 


the  conditions  peculiar  lo  each  industry — 
not  to  mention  the  temperament  and 
vision  of  the  personnel  involved — may  be 
said  to  cover  the  needs  of  manufacturing 
groups  of  competitors  seeking  to  combine 
under  the  Webb-Pomerene  Law.  Xon- 
competitors  do  not  need  to  register  with 
the  Trade  Commission  their  intent  to  take 
advantage  of  the  provisions  of  the  new 
law,  though  many  non-competitive  groups, 
represented  by  the  commission  houses  or 
manufacturers'  agents  with  ofEces  at  the 
seaboard,  have  done  so  as  a  precautionary 
measure. 

The  Ideal  Form 

In  every  new  industrial  efl'ort,  j^articu- 
larly  of  the  cooperative  order,  the  ideal 
needs  must  give  way  to  the  practical,  in 
some  measure,  but  there  seems  to  be  no 
reason  why  American  manufacturers, 
with  the  world  before  them  and  with 
government  recognition  of  the  need  for 
assisting  every  legitimate  kind  of  foreign- 
trade  expansion,  should  not  organize  upon 
the  most  efEcient  basis.  Thus  far  there 
has  been  only  one  apparent  handicap, 
namely,  a  tendency  on  the  part  of  certain 
competitors  in  the  several  groups  to  insist 
that  every  important  manufacturer  be  in- 
cluded in  the  combine.  This  has  made  for 
delay,  and  not  infrequently  the  best  re- 
sults have  been  sacrificed  in  the  interests 
of  expediency  where  basic  principles 
should  have  prevailed.  They  have  lost 
sight  of  this  fundamental  in  foreign 
trade,  that  efficient  measures  for  success- 
fully meeting  com])etition  abroad  are 
much  more  important  than  small  difi'or- 
ences  of  opinions  at  home.  When  an  ex- 
port company,  no  matter  how  powerful 
its  individual  units,  goes  into  the  markets 
of  the  world  to  compete  for  business 
against  merchants  whose  exi)eriencc  in  all 
phases  of  foreign  trade  is  longer  and  wider, 
it  needs  every  possible  equii)ment  and  ad- 
vantage to  succeed.   It  cannot  afl'ord  to  l)c 


handicapped     by     minor     considerations 
in  respect  to  internal  organization. 

The  ideal  selling  organization,  which 
we  will  call  No.  1 ,  is  made  up  of  a  group  of 
competitors  all  making  or  producing 
about  the  same typeof  product,  whocreate 
their  own  export  company  by  contribu- 
ting funds  for  working  capital  by  the 
purchase  of  stock,  such  capital  being  used 
for  the  establishment  of  offices  and  staff 
at  seaboard  in  the  United  States,  for  the 
expenses  of  travelling  representatives, 
ofEces,  warehouses  and  possibly  show- 
rooms abroad,  publicity  and  general  pro- 
notive  effort.  It  is  assumed,  for  the  sake 
of  this  illustration,  that  we  are  dealing 
with  a  major  industry  and  a  staple  pro- 
duct, such  as  lumber,  coal,  copper,  or 
cement,  and  with  a  group  of  producers 
who  have  reasons  for  going  into  the  ven- 
ture on  a  large  scale. 

First,  what  should  be  the  capital  of 
this  export  company  ?  That  depends  upon 
the  nature  of  the  product,  the  potential 
demand  abroad  (whether  the  market  be 
permanent  and  universal  or  confined  to  a 
few  countries),  to  what  extent  the  partici- 
pants wish  to  spread  the  initial  effort,  and 
upon  the  size  of  the  foreign  organization 
necessary  to  cope  with  the  business  that 
may  be  expected  at  the  end  of  a  reason- 
able, pioneering  period.  It  is  obvious 
that  the  capital  of  the  company  can  be 
increased  whenever  the  volume  of  busi- 
ness demands.  A  general  tendency  has 
been  noted  to  limit  the  initial  capital 
to  moderate  figures,  and  to  depend  up- 
on modern  methods  of  foreign  bank- 
ing as  the  means  of  financing  the  project, 
thus  avoiding  the  necessity  of  tying  up  a 
large  amount  of  money.  When  the  amount 
of  capital  has  been  agreed  upon,  it  is  sim- 
ply called  for  as  required  for  working 
expenses;  it  is  not  necessarily  all  j)n)\i(ied 
at  once. 

There  are  three  main  points  for  com- 
mon agreement: 


1.  The   basis   of   contribution   to   the   working 
capital  of  tlie  company,  by  purchase  of  stock. 

2.  The  allocation  of  orders. 

3.  An   equitable    provision    for   those    already 
having  established  connections  abroad. 

Retention  of  Trademarks 

A  recurrent  demand  among  manufac- 
turers of  standing  who  seek  to  cooperate 
for  foreign  trade  is  that  the  identity  of 
their  product  shall  be  preserved,  regardless 
of  collective  selling  arrangements.  This 
means  that  they  wish  to  avoid  the  chance 
of  losing  any  of  the  goodwill  already  es- 
tablished by  the  previous  sale — through 
whatever  channels — of  their  merchandise 
in  foreign  markets.  They  insist  upon  this 
provision,  at  least  during  what  they  re- 
gard as  the  experimental  period  of  the  co- 
operative effort. 

This  is  neither  unnatural  nor  illogical, 
though  in  many  cases  this  factor  has  been 
over-emphasized.  In  the  markets  of  the 
world,  with  thousands  of  international 
competitors  who  pioneered  the  foreign 
fields  long  before  American  industry  be- 
came important,  substantial  goodwill  for 

WEBB  COMBINATION  NO.l 


FarT/c'/patinjg  A/arri/facturers 

or  Proc/ucers 
JZ3456789   10 


Exfi  ort/n£\T Com  pony 
Foreijgn    Markets 

The  above  diagram  vizualizes  a  combination 
of  competitors  manufacturing  the  same  kind  of 
product.  The  members,  that  is,  the  partici- 
pating manufacturers,  subscribe  to  stock^to 
furnish  working  capital — -on  some  proportionate 
basis,  say,  that  of  relative  production  capacity. 
All  sales  are  made  and  cleared  through  the  Export 
Company,  managed  by  executives  experienced 
in  export  trade.  Orders  procured  through  the 
Export  Company  are  distributed  to  the  members 
in  the  order  of  the  relative  amount  of  the  invest- 
ment, each  member  having  his  contract  with  the 
Company  and  guaranteeing  a  minimum  per- 
centage of  product  to  be  delivered,  over  a  speci- 
fied period,  upon  call  of  the  Company.  The 
working  capital  usually  is  paid  in  as  required. 
See  page  6. 


the  American  product  is  confined  to  com- 
paratively a  few  names.  But  since  it  is 
a  point  upon  which  most  well-established 
manufacturers  in  erery  group  are  insis- 
tent, provision  has  been  made  for  it,  and 
it  has  been  necessary  to  formulate  plans 
on  that  basis.  This  has  been  done,  and 
it  can  be  done  in  practically  every  line  of 
business  by  the  adoption  of  a  dominating 
trademark  governing  the  output  of  the 
combination,  with  subsidiary  trademarks 
plainly  indicating  the  source  of  mill  pro- 
duction or  individual  trade  name. 

The  composition  of  the  ideal  combina- 
tion, which  we  have  called  No.  1,  may  best 
be  visualized,  perhaps,  by  the  accompany- 
ing diagram,  which  assumes  (for  the  sake 
of  brevity  and  space)  the  number  of  par- 
ticipants to  be  ten.  As  a  matter  of  fact, 
there  are  sixty  or  seventy  corporations  in 
some  of  the  combinations  already  formed, 
and  in  one  potential  group  there  is  a  poss- 
ibility that  several  hundred  manufac- 
turers may  be  represented. 

Creating  Working  Capital 

The  basis  of  contribution  to  the  work- 
ing capital  by  purchase  of  stock  in  the 
Export  Company,  on  the  part  of  the  man- 
ufacturers desiring  to  join  the  combine, 
is  usually  that  of  production  capacity, 
where  that  can  be  easily  gauged.  This 
does  not  necessarily  mean  output  of  the 
domestic  plant  or  plants,  because  there 
may  be  instances  where  one  manufacturer 
with  a  larger  plant  than  his  neighbor,  by 
reason  of  domestic  contracts  or  longtime 
obligations  to  old  customers,  may  not 
have  for  export  the  same  volume  of  pro- 
duct as  a  competitor  with  a  somewhat 
smaller  plant.  So  we  speak  of  "production 
capacity"  as  representing  the  volume  of 
product  which  each  member  of  the  com- 
bine is  able  and  willing  to  pledge  himself 
in  written  contract  to  deliver  to  the  Ex- 
port Company,  upon  specified  notice, 
over  a  given  time,  known  as  an  allotment 
period.   It  means  surplus  output  in  excess 


[r 


of  domestic  demand.  There  need  be  no 
difficulty  in  deciding  this,  nor  any  need 
to  worrj'  about  changing  conditions.  The 
allotment  period  may  be  made  three 
months,  six  months,  or  a  year,  and  the 
contracts  between  the  individual  manu- 
facturer and  the  Export  Company  changed 
as  time,  and  necessary  readjustments, 
seem  to  recpiire.  Thus  each  member  of  the 
combine  may  be  as  conservative  as  he 
wishes  in  making  his  contract  to  deliver 
goods  on  call  from  the  Export  Company. 
The  Comj)any  makes  such  calls  according 
to  terms  incorporated  in  the  by-laws  and 
standard  contracts,  and  in  response  to 
orders  sent  in  l)y  the  selling  agents  cover- 
ing the  foreign  field. 

One  manufacturer  may  testify  that,  in 
normal  times,  his  capacity  enables  him 
to  pledge  ten  per  cent,  of  his  output  for 
export;  another  five,  another  fifteen, 
another  twenty  per  cent.,  and  so  on  down 
the  line.  ( During  the  readjustment  period. 
following  the  armistice,  many  manu- 
facturers in  some  major  industries  were 
able  and  willing  to  pledge  as  high  as  fifty 
per  cent,  of  their  plant  capacity  for  ex- 
port.) The  member  whose  pledged  volume 
of  product  for  overseas,  to  be  held  for  the 
disposal  of  the  Export  Company,  is  great- 
est takes  the  largest  amount  of  stock  in 
the  combination.  His  contribution  to 
working  capital  is  greater  than  that  of 
any  of  the  others  because  his  capacity  is 
greater.  Usually,  of  course,  the  corpora- 
tion whose  contribution  is  proportionally 
the  highest  is  the  largest  and  wealthiest. 

^  oting  Power 
In  a  steel  combination,  the  stock  is 
held  for  five  years  in  a  voting  trust,  and 
control  is  determined  in  advance  for  that 
period.  In  the  Textile  Alliance,  working 
capital  is  raised  out  of  non-voting  pre- 
ferred stock,  with  voting  control  vested 
in  common  stock  issued  to  four  textile 
trade  a.ssociations  with  which  the  partici- 
pating textile  merchants  are  affiHated.     In 


the  copper  combination,  also,  the  working 
capital  is  raised  out  of  non-voting  pre 
f erred  stock,  the  voting  control  being  vested 
in  stock  without  "par  value  which  is  al- 
loted,  one  share  to  each  particii)ating 
copper  producer,  whose  voting  strength 
in  respect  to  such  shares  without  par 
value  varies  according  to  the  amount  of 
the  copper  production  of  such  partici- 
pant. In  the  phosphate  combination, 
which  is  an  incorporated  association, 
there  is  no  stock  whatever,  the  control 
being  established  by  a  tw  o-thirds  vote  of  its 
participating  members,  and  whose  expen- 
ses are  defrayed  out  of  assessments  upon 
the  membership.  In  one  of  the  lumb<«r 
combinations,  working  capital  has  been 
raised  out  of  stock  which  is  assigned  by 
the  stockholders  to  stock  trustees  who 
vote  as  directed  by  a  majority  vote  of  the 
stockholders  assigning  such  stock.  In 
another  lumber  group,  the  working  capital 
has  been  raised  out  of  non- voting  pre- 
ferred stock,  the  control  being  vested  in 
stock  without  ])ar  value,  of  which  each 
lumber  producer  has  one  share.  In  another 
lumber  grouD  the  capital  stock  has  been 
subscribed  for  by  the  lumber  producer.** 
in  proportion  to  their  productive  capacity, 
but  is  voted  upon  the  basis  of  one  vote  for 
each  producer,  regardless  of  the  number  of 
shares  such  limber  producer  owns.  In  still 
another  lumber  group,  the  working  capital 
has  been  raised  out  of  non-voting  preferred 
stock,  the  control  being  vested  in  connnon 
stock  which  is  held  by  the  original  sub- 
scribers to  the  preferred  stock  in  the  same 
proportion  as  their  holdings  of  preferred 
stock. 

This  indicates  that  working  capital  may 
thus  be  raised  out  of  capital  stock,  with 
or  without  par  value,  with  or  w'ithout 
voting  power,  and  with  or  without  pre- 
ference as  to  dividends  and  other  rights. 
Subscriptions  for  this  purpose  may  be 
called  for  on  the  basis  of  {)roductive ca- 
pacity, or  total  sales,  or  export  sales  for  the 
I)receding  year,  or  averaged  over  a  number 


of  years.  Voting  control  may  attach  to 
the  stock  out  of  which  the  working  capital 
is  issued,  or  it  may  be  vested  in  stock  of 
another  class.  It  may  be  distributed  ac- 
cording to  the  subscriptions  for  working 
capital,  or  upon  a  basis  providing  for  equal 
voting  strength  to  each  participating 
member.  It  may  be  distributed  according 
to  the  relative  export  sales,  or  total  sales, 
or  the  respective  productive  capacity  of 
the  participating  members  as  such  ca- 
pacity varies  from  year  to  year  during  the 
connection  of  the  ])articipators  with  the 
export  association.  It  is  simply  a  question 
of  establishing  the  rights  of  the  stock- 
holders— invariably  active  participators 
in  the  combination — in  accordance  with 
their  obligations  to  the  export  association. 
It  is  vital  that  the  organization  shall  be 
so  shaped  that  the  obligations  of  the 
participating  members  to  the  export  asso- 
ciation in  respect  to  export  sales  shall  be 
binding  and  fortifying  in  every  detail. 

AUocation  of  Orders 

The  basis  of  allocation  of  orders  is  the 
same.  This  means  that,  based  on  produc- 
tion capacity  also,  the  member  whose  in- 
vestment is  largest  is  first  on  the  list  for 
foreign  business,  in  the  order  of  pre- 
cedence thus  established.  He  has  greater 
volume  to  supply  and  the  size  of  his 
organization  is  such  that,  if  he  were  in 
foreign  trade  for  hinij^elf,  he  w^ould  be  apt 
to  get  more  business  than  most  of  his 
competitors  in  the  same  line. 

There  are,  of  course,  exceptions  to  this 
basis  of  allocation.  The  above  illustration 
applies  in  the  majority  of  instances,  but 
it  does  not  serve  every  group  of  producers 
formed  to  operate  through  their  own  ex- 
port company,  with  their  own  organiza- 
zation.  The  Cotton  Converters,  for  ex- 
ample, are  manufacturers  who  simply 
convert  textile  goods  "from  the  gray",  as 
the  phrase,  is  into  finished  designs  of 
their  own  creation.  Their  success  depends 
upon  their  skill  in  selecting  designs  which 


meet  with  popular  favor.  They  have  no 
plants;  their  "gray"  products  are  made 
to  their  order  by  others  and  so  their  capacr- 
ity  to  turn  out  goods  is  practically  un- 
limited. They  could  base  their  individual 
investment  upon  yearly  sales,  calculated 
over  an  average  period,  but  allocation 
could  not  be  made  upon  that  basis  for  the 
reason  that  the  Export  Company,  repre- 
senting the  group,  will  be  compelled,  as  a 
matter  of  business  acumen,  to  push  the 
designs  of  that  manufacturer  whose  prod- 
uct meets  with  greatest  favor  in  the 
foreign  market  during  the  current  season. 

In  this  case  the  amount  of  capital  re- 
quired was  fixed  and  each  member  of  the 
potential  combine  agreed  to  take  stock 
in  accordance  with  the  recommendations 
of  a  representative  committee,  each  pro- 
ducer to  share  in  the  profits  of  the  Export 
Company  in  proportion  to  his  investment. 
Each  converter  present  during  the  early 
conference  stages  realized  that  whether 
his  own  or  one  of  his  competitor's  designs 
would  be  in  greatest  demand  abroad  next 
year  or  the  year  after  was  largely  a  matter 
of  fortune,  and  so  each  member  was  taking 
an  equal  chance.  But  they  did  not  wish 
to  lose,  merely  because  of  the  peculiar 
conditions  relating  to  their  line  of 
business,  the  advantages  of  collective 
selling  arrangements,  of  common  ware- 
houses and  display  rooms,  uniform  credit 
arrangements  and  joint  advertising.  A 
standardization  committee  may  have  to 
fii  an  assumptive  margin  of  profit  on  the 
many  different  lines,  in  order  to  adjust 
price  agreements — quite  a  task  for  a 
voluntary  committee  of  business  men — 
but  the  farseeing  leaders  in  this  industry 
are  not  allowing  mere  obstacles  to  deter 
them  and  they  will  ere  long  be  doing 
business  together  in  the  foreign  field. 

In  another  instance  the  prospective  par- 
ticipants in  a  group  of  manufacturers  seek- 
ing to  combine  for  export  have  preferred 
to  subscribe  to  stock  on  a  basis  of  their 
mercantile  rating,  and  to  allocate  orders 


9 


on  the  same  basis.  This  method  was  adop- 
ted as  the  result  of  their  war  exi)erience. 
It  may  easily  occur  that  peculiar  con- 
ditions prohibit  the  adoption  of  any  plan 
of  allocation  yet  worked  out — though, 
with  so  many  varieties  developed  to  date, 
that  would  be  very  unusual.  But  there 
is  always  a  way  where  there  is  sufficient 
will — and  vision.  The  advantages  of  col- 
lective selling  are  so  many  that  if  condi- 
tions in  a  given  industry  forbid  the  enjoy- 
ment of  all,  there  usually  is  enough  attrac- 
tion in  those  which  can  be  procured  to 
lead  to  determined  cooperation. 

Meeting  Foreign  Preferences 

It  nuist  be  remembered  that  the  prim- 
ary consideration  in  the  mind  of  the 
chosen  head  of  the  Export  Company  is  to 
do  business,  which  means  he  must  accom- 
modate the  foreign  buyer  and  build  up 
good  will.  How,  then,  it  may  be  asked, 
are  you  going  to  preserve  your  fixed  basis 
of  proportionate  allocation  of  orders  if  the 
foreign  buyer  in  any  one  or  several  mar- 
kets asserts  a  decided  preference  for  one 
brand  or  make  of  goods  over  another, 
either  because  he  has  had  reason  to  know 
that  brand  better  than  others,  or  because 
of  his  own  expression  of  taste  and  judg- 
ment? 

There  is  more  than  one  way  of  solving 
this  apparent  difficulty.  The  solution 
which  experience  has  proved  to  be  most 
satisfactory  is  i)rovided  by  price  restric- 
tion on  the  intended  product.  For  ex- 
ample, let  us  suppose  that  in  a  group  of 
manufacturers  of  electric  motors,  through 
established  connections  abroad — prior  to 
the  creation  of  the  combination — or 
through  the  immediately  jiroclainied  pre- 
ference of  the  foreign  buyer  in  a  given 
market,  a  demand  for  oi.e  particular  make 
of  motor  suddenly  asserts  itself  qviite  out 
of  proportion  to  the  volume  of  orders  for 
other  types  of  machines  made  by  other 
manufacturers  in  the  combine.  So  soon 
as  the  orders  for  this  particular  type  of 


motor — which  may  carry  a  subsidiary  as 
well  as  a  dominant  trademark — exceed 
tlie  quota  of  business  already  allocated  to 
the  manufacturer  of  said  motor,  an  ad- 
ditional cost  of  from  5%  to  73^2% >  say, 
above  the  list  price  is  added  to  the  selling 
price  of  tlie  article  in  the  market  from 
irhich  the  orders  are  coming.  This  may 
not  check  the  insistence  of  the  foreign 
buyer,  because  service  and  quality  in 
mechanical  devices,  especially  in  Europe, 
are  often  much  more  powerful  selling 
factors  than  price.  But  it  is  apt  to 
decrease  the  sales  a  little,  and  if  it  does 
not,  then  the  extra  profits  on  these  sales, 
in  excess  of  the  volume  represented  by  the 
allocation  due  the  manufacturer  of  the  now 
popular  motor,  go  into  the  pool  and 
serve  to  compensate  the  other  members 
of  the  combine  whose  allotment  of  foreign 
business  may  have  suffered  by  reason  of 
the  foreign  buyers'  insistent  demand  for 
the  specified  type  of  motor. 

What  can  be  fairer  than  this.^  It  must 
be  remembered  that  the  manufacturer  of 
this  motor  has  already  pledged  for  export, 
all  surplus  output  above  estimated  do- 
mestic demand  and  that  he  has  already 
benefited  through  the  promotive  ef- 
forts of  the  collective  selling  organization. 
He  could  not,  under  any  circumstances, 
arrange  immediately  for  a  large  increased 
output,  whereas  the  automatic  cost-check 
aft'orded  by  the  increase  in  price  does  af- 
ford him  time  to  extend  his  plant  facilities, 
if  he  wishes,  during  the  period  until  a  new 
allotment  when  a  readjustment  of  allo- 
cations can  be  made.  As  the  other  mem- 
bers of  the  combine  are  all  sharing  pro- 
portionally in  the  profits  of  the  Export 
Company,  all  they  sutt'er  is  the  loss  of 
whatever  differences  there  might  be 
in  orders  to  keep  their  plants  going  at 
higher  capacity  if  the  prearranged  allot- 
ment of  business  had  come  to  them 
in  normal  rotation.  In  one  case,  the 
manufacturer  whose  motor  found  great- 
est    foreign     favor     would     have    gotten 


10 


CONNEICTIONS     OF    THE    DEUTSCHE    BANK     OT  BERUN      THROUGH     EXECUTIVES  'VJD    MEMBERS  CF  ITS  BQVIO 
/ARRANGED    IN   ACCORDANCE    WITH   Similar    DIAGRAMS  Or  OC MERRILL 


all  the  business  he  expected — and  more — 
and  in  the  other,  his  associates  in  the  com- 
bine would  be  in  a  better  position  than 
if  each  had  been  selling"  alone  and  shared 
in  none  of  the  profits  of  his  associates' 
jirosperity. 

Freedom  to  Promote 
Individual  Sales 

If  any  member  of  the  combine  making 
a  product  which  is  competitive  as  to 
trademark  as  well  as  in  price  and  quality 
advantage,  feels  that  he  is  not  getting  all 
the  business  that  might  be  secured  if 
he  were  pushing  his  own  goods  abroad 
exclusively  with  his  own  representatives, 
he  is,  or  should  be,  always  at  liberty  to 
send  his  o'vsti  representative  into  the 
foreign  field  to  promote  business  for 
his  particular  product,  provided  that  it  is 
understood  that  all  orders  received  through 
any  agencies  whatsoever  are  faithfully 
reported  to  and  cleared  through  the  pool. 
Proper  penalties,  in  the  by-laws  and  con- 
tracts, can  be  provided  should  there  be 
any  infractions  of  this  rule. 

Any  manufacturer  who  does  send  his 
own  salesmen  abroad  is,  of  course,  adding 
to  his  individual  selling  expense,  but  we 
are  assuming  that  he  does  this  deliberately 
because  of  his  belief  that  it  will  pay  him, 
knowing  that  the  combination  offers 
him  other  economies  already  mentioned. 

In  one  important  group,  a  large  pro- 
ducer who  believed  he  had  established 
considerable  goodwill  abroad  by  the  de- 
velopment of  his  own  export  organization, 
felt  that  not  a  little  popularity  had  been 
created  for  his  particular  grade  of  product, 
and  said  that  he  was  held  by  contracts 
with  certain  foreign  distributing  agencies 
for  se-i-eral  years  ahead.  At  first  he  was 
very  much  averse  to  throwing  in  his  lot 
with  others  who  had  no  such  already  ac- 
quired assets  in  the  foreign  field.  Ulti- 
mately this  producer  came  to  see  that 
there  were  other  advantages  to  be  j)ro- 
cured    by    collective    selling    which    out- 


weighed those  to  which  he  had  given 
initial  thought,  and  he  concluded  by 
agreeing  to  pay  a  small  commission 
into  the  pool  for  the  privilege  of  contin- 
uing his  individual  contracts  during  their 
present  life,  and  for  the  insurance  against 
competition  from  others  who  appeared  to 
be  willing  to  go  ahead  without  his  co- 
operation, if  necessary. 

In  the  case  of  two  other  groups,  each 
producing  staple  products,  their  plan  pro- 
vides that  the  individual  members  of  the 
Export  Company  shall  supply  the  combine 
with  such  percentage  of  the  producer's 
capacity  "as  the  Board  of  Directors  may 
determine". 

It  is  provided  that: 

"All  sales  of  the  producer's  (product 
here  specified)  in  or  for  export  trade,  ex- 
cepting, however,  sales  under  contracts 
now  existing,  shall  be  made  exclusively 
through  the  Company  (combine).  Such 
sales  shall  be  permitted  through  other 
channels,  however,  if  made  at  prices  and  on 
terms  previously  approved  by  the  Com- 
pany, and  if  immediately  reported  to  the 
Company,  and  if  packed  and  shipped  un- 
der the  producer's  own  label,  or  dis- 
tributor's label,  as  heretofore  reported  to 
Company,  and  if  the  manufacturer  shall 
pay  to  the  Company  upon  its  demand, 
such  sum  per as  the  Board  of  Di- 
rectors of  the  Company  from  time  to 
time     shall     determine — not     exceeding, 

however,  five  cents  (5c)  per The 

Company  shall  maintain  in  New  York 
City  and  elsewhere  such  offices,  yards, 
agencies,  representatives,  and  business 
connections  as  in  its  opinion  shall  best 

promote  export  trade  in ,  and  so 

far  as  practicable  shall  apportion  its 
orders  between  the  producers  and  all 
others  having  agreements  with  the  Com- 
pany identical  herewith  and  then  in  force 
in  proportion  to  their  respective  produc- 
ing capacities  determined  as  aforesaid.' 
The  producers  shall  execute  each  order 
so    apportioned    and    shall    pack,    label, 


11 


mark,   and   ship   all so   ordered    ii\ 

accordance  with  s]>ecifications  and  direc- 
tions furnished  by  the  Company.  With 
each  such  shipment,  the  manufacturer 
shall  furnish  to  the  Company,  in  such 
form  as  the  Company  shall  prescribe, 
invoices,  bills  of  lading  and  certificates 
of  inspection  signed  by  an  insj)ector  fur- 
nished by  the  Con:pany,  which  certifi- 
cates shall  be  final  on  all  questions  re- 
garding Cjuality,  weight,  c|uantity,  jiack- 
age,  and  marking  of  such  shipment.    .Ml 

losses  and  charges  in  respect  to  such 

incurred  subsequent  to  such  shipment, 
shall  be  borne  by  the  Company. 

"When  ordering from  the  pro- 
ducer, the  Company  shall  designate  the 
price  f.o.b.  mill,  at  which  the  producer 

shall    sell    such to    the    Company. 

For furnished  uj)on  such  order,  the 

manufacturer  shall  accept  in  fidl  pay- 
ment, and  the  Company  shall  i>ay  three- 
fourths  of  such  price  within  thirty  days 
after  date  of  shipment  from  mill,  and  one- 
quarter  within  ninety  days  after  date  of 
shipment  from  mill,  or  shall  pay  in  such 
manner  as  shall  be  agreed  upon  by  the  par- 
ties hereto.    The  Company  may  sell  suc-h 

WEBB  COMBINATION  NO. 2 

Parf/c/'poT/n^  A/a/7u/acturers 

or  Producers 
1234567     S9     10 


Fore /J  r?   Markets 

S  =  Subsidiary 

III  tlii.s  t'orni  of  coiubination  cacli  nionil)or,  or 
particii)ating  manufacturer  or  producer,  wishing 
to  continue  to  do  business  individually  with 
foreign  customers,  forms  a  subsidiary  company 
Jar  export  bmnneaa  only.  The  subsidiaries  may 
create  a  Webb  Association  and  have  workinji 
agreements  as  to  prices,  terms  of  credit,  alloca- 
tion of  territories,  etc.,  but  each  subsidiary  com- 
pany uses  it's  own  inriividual  sellinji  and  dis- 
tritjuting  ajjencics  for  the  promotion  of  its  own 
l>usiness      See  pages  12  and  ]'-i. 


in   export    trade   at    any   price   it 

choo.ses,  and  may  retain  to  its  own  use 
the  entire  proceeds  thereof". 

These  provisions  are  (j noted  as  serving 
to  show  how  simple  the  contract  between 
the  individual  participant  and  the  com- 
bine may  be.  Each  of  the  grouj)s  referred 
to — in  fact  all  of  the  groups  dealing  in 
staple  ])roducts — have  provided  very 
rigid  machinerj^  for  the  insuran-ce  of 
the  c|uality  and  standard  of  products 
which  the  individual  producer  n;ay  fur- 
nish for  export.  It  is  realized  that  the 
utmost  must  be  done  to  protect  the  foreign 
market  against  despoiling  by  unwise  and 
shortsighted  individuals  who  might  seek 
to  get  rid  of  inferior  products  on  the  other 
side  of  the  water. 

In  what  is  termed  Xo.  "i  plan,  each  one 
of  a  number  of  manufacturers  creates  a 
subsidiary /or  export  business  only,  and  the 
subsidiaries  form  a  trade  association  and 
register  for  operation  under  the  Webb- 
Pomerene  Law,  without  a  central  selling 
agency  or  stock  company  of  any  kind.  The 
executive  staff  of  the  trade  association 
makes  trade  and  credit  investigations, 
and  sui)plies  the  information  to  the  mem- 
bers of  the  trade  association,  the  members 
supplying  the  operating  ex])enses  by  pay- 
ing dues  or  submitting  to  proportionate 
annual  assessments  based  upon  their 
yearly  sales.  The  subsidiaries  may  have 
"gentlemen's  agreements"  as  to  prices, 
terms  of  credit,  allocation  of  terri- 
tories, etc.,  but  each  subsidiary  company 
uses  its  own  individual  selling  and  dis- 
tributing agencies  for  the  promotion  of 
its  own  business.  The  members  of  the 
trade  association  need  not  have  any  agree- 
ment as  to  prices  if  they  allocate  re- 
spective foreign  territories  and  agree  not 
to  sell  in  one  another's  domain.  Like- 
wise, if  they  do  not  allocate  territories 
])ut  agree  upon  a  free  field,  then  they  may 
have  agreements  as  to  prices,  terms  of 
credit,  common  warehou.se  facilities,  etc. 
12] 


CONNECT/ONS  OF  THE  /ILGEMEIN£  ELEKTRIC/TyiTS  GESELLSCH/IF^T  OF BEIfUN  THmUSH  EXECUTIVES  /WD  MEMBEff5  OF  ITS  30/^f^D. 
—  ARKANGEO  m /^CCORO^NCEWirH  Slf/tL/^R  DMGR,^MS   OF  O  C.MERRILL. 


Tentative  Organizations 

ISIanufacturers  in  one  or  two  industries 
who  have  no  definite  statistics  and  positive 
information  as  to  the  extent  of  the  poten- 
tial market  abroad,  whose  aggregate 
domestic  supply  already  equals  domestic 
demand,  and  who  believe  that  a  demand 
for  their  American  product  may  he  created 
in  the  foreign  field — have  organized 
tentative  associations  (Plan  No.  3)  to 
conduct  investigations  in  advance  of 
attempts  to  do  any  business  on  a  co- 
operati\e  plan  or  scheme.  They 
have  assessed  themselves  on  a  basis 
proportionate  to  their  mercantile  rating,  or 
yearly  sales,  and  have  thus  supplied 
funds  wherewith  to  send  properly-ecjuip- 
ped  men  abroad — men  who  understand 
their  products — with  instructions  to  fur- 
nish definite  information  as  to  the  pos- 
sibilities of  developing  business  in  their 
lines  in  markets  where  freight  rates 
enable  them  to  compete  permanently 
with  the  foreigner. 


WEBB    COMBINATION  N0.3 


Partic/pot/n^  Manufacturers 

or  Pro  c/ucers 
1234567QS10 


A/Ghb     Assiqcjotion 


Foreign  MorAeTs 

In  Xo.  .3  a  Webb  Association'' is^formed  as  a 
tentative  arrangement,  for  purposes  of  market 
research  and  investigation,  in  advance  of  subse- 
quent business  operations  should  reports  justify 
development.  This  plan  is  recommended  for 
groups  of  producers  or  manufacturers  who  are 
not  sure  of  the  extent  of  the  existing  demand  in 
any  given  market  or  who  believe  that  a  perman- 
ent demand  for  their  product  may  be  created  by 
promotive  effort.  It  may  also  be  used  by  man- 
ufacturers who  wish  to  combine  for  purposes  of 
economy  in  warehousing,  display  rooms,  adver- 
tising, etc.,  while  each  retains  individual  selling 
agencies  and  competes  for  business  in  foreign 
markets. 


This  is  an  intelligent  way  of  approach- 
ing the  problem.  It  does  not  cost  a  large 
amount  of  money  to  procure  such  specific 
information  and  it  is  worth  all  it  costs  to 
have  it. 

Foreign  Combinations 

Combinations  in  trade  have  been  in  ex- 
istence in  Europe  for  many  years.  The 
report  of  the  Federal  Trade  Commission 
for  1916  furnished  elaborate  details  con- 
cerning the  activities  of  these  syndicates 
and  cartels,  formed  by  European  buyers 
as  well  as  exporters.  In  Germany,  Italy, 
Switzerland,  Holland,  Sweden,  Belgium, 
Japan,  and  certain  other  countries  where 
national  policies  concerning  industrial 
combinations  contrast  with  those  of 
the  United  States,  business  men  have 
been  much  freer  to  cooperate  and  combine 
than  in  this  counrry.  They  have  de- 
veloped numerous  comprehensive  com- 
binations, sometimes  aided  by  their 
Governments,  which  effectually  unite 
their  activities  both  in  domestic  and 
foreign  trade.  In  England  and  Central 
Europe  though  freedom  to  combine 
is  considerably  abridged  under  the  law, 
important  coml)inations  have  also  been 
formed. 

In  Germany  prior  to  the  war  there  were 
600  important  cartels,  i.  e.,  combinations 
to  control  the  market,  embracing  practi- 
cally every  industry  in  the  Empire.  Many 
dominated  the  export  trade  of  their  in- 
dustries and  carried  on  vigorous  cam- 
paigns to  extend  their  foreign  business, 
to  prevent  competition  among  German 
producers  in  foreign  markets,  and  to 
secure  profitable  prices.  Thus  the  German 
dye  industry  operated  as  a  unit  in  foreign 
trade  under  the  leadership  of  two  great 
groups  of  allied  producers,  the  Badische 
group  and  the  Ilachst-Ca.ssella,  which 
were  working  under  a  fifty-year  agreement 
to  avoid  competition  with  each  other. 
The  manufacture  and  exportation  of 
electrical   equipment   was   made   one   of 


13 


the  bulkwarks  of  (ierman  foreign  trade 
by  two  great  companies,  the  Allgenieine 
Elektricitats-Gesellschaft  and  the  Sie- 
mens-Schnckert.  working  in  harmony 
with  each  other,  with  numerous  sub- 
sidiaries at  home  and  abroad.  Half  of  the 
$150,000,000  worth  of  coal  and  coke  ex- 
ported annually  was  sold  by  one  central 
selling  agency,  maintained  by  the  great 
Rheinisch-^Vestfalische  coal  syndicate, 
of  which  some  of  the  Prussian  (Govern- 
ment mines  were  members,  and  which 
controlled  the  bulk  of  all  the  coal  and 
coke  produced  in  the  Empire.  Practically 
all  the  rapidly-increasing  iron  and  steel 
export  business  was  handled  respectively 
by  the  single  selling  agencies  of  the 
Roheisen-Verband  and  the  Stahlwerks- 
Verband,  the  aggressive  and  closely  con- 
nected unions  of  German  iron  and  steel 
manufacturers.  The  coal  and  iron  and 
steel  combinations  have  fostered  foreign 
business  through  export  bounties  and 
other  means. 

In  France  and  Belgium,  syndicates  of 
iron  and  steel,  glass,  and  other  industries 
were  strong  factors  in  domestic  and  foreign 
trade.  Silk  ribbon  manufacturers  of  France 
and  Germany  conducted  their  export  trade 
in  accordance  with  a  joint  agreement.  In 
Italy,  Russia,  former  Austria-Hungary, 
Switzerland,  Sweden,  Greece,  Argentina, 
Chile  and  Ecuador,  central  organizations 
unite  the  interests  of  producers  in  the  in- 
dustries characteristic  of  those  countries, 
such  as  coal,  iron  and  steel,  agricultural 
machinery,  oil,  sulphur,  superphosj)hatcs. 
cement,  matches,  chocolate,  embroidery, 
silk  goods,  watches,  cotton  goods,  con- 
densed milk,  canned  fish,  currants,  que- 
bracho, iodine,  cacao,  etc. 

In  Japan  an  export  organization  of 
textile  manufacturers  has  developed  an 
extensive  cotton  goods  trade  of  North 
China.  The  trade  in  tea  is  controlled  by  a 
nationwide  "tea  council".  One  great 
Jaj)anese  firm,  which  in  itself  combines 
niaTiut'ncluriiig,     iiiiiiiiig,     shi|)piiig,     and 


merchandising  enterprises,  has  been  rai)id- 
ly  extending  .Iaj)anese  trade  in  all  lines 
throughout  the  Far  East,  and  the  Japan- 
ese Government  is  directly  assisting  the 
development  of  shipping,  banking,  and 
trading  for  foreign  business. 

The  long  established  trade  in  British 
products  in  many  markets  of  the  world, 
due  to  their  pioneer  position,  the  excel- 
lent representation  afforded  by  British 
export  houses,  and  the  advantage  of 
British  shipping  and  banking  facilities, 
has  enabled  their  manufacturers  to  hold 
foreign  markets  in  many  lines  without 
such  a  large  degree  of  combination  as 
characterizes  German  industry.  But  in 
various  important  industries  combinations 
have  grown  up.  Thus  most  of  the  great 
coal  export  business  is  done  by  power- 
ful organizations,  combining  mine  oper- 
ators, marketing  companies,  coal  shipping 
lines,  and  foreign  distributing  companies. 
This  gave  British  coal  its  grip  on  the  im- 
portant South  American  market.  British 
cement  manufacturers  united  in  a  strong 
and  successful  luiion  for  the  extension  of 
their  overseas  trade.  In  1915,  a  number  of 
large  British  manufacturers  of  machinery 
of  all  sorts  formed  the  Representation  for 
British  Manufacturers  (Ltd.),  an  organ- 
ization to  handle  their  business  in  certain 
important  foreign  markets  and  to  carry 
on  an  aggressive  campaign  for  its  exten- 
sion. Similiar  organizations  for  foreign 
trade  are  in  progress  of  formation  among 
other  British  manufacturers.  In  the  electri- 
cal, cotton-textile,  pottery,  tobacco,  wall- 
paper, iron  and  steel,  and  various  other 
industries  strong  associations  and  com- 
binations are  important  factors  in  foreign 
and  domestic  business. 

It  is  against  such  organizations  as  these, 
uniting  powerful  groups  of  foreign  con- 
cerns, backed  l)y  great  banks,  aided  by 
railway  and  slii])  lines,  and  assisted  by 
foreign  governinents  that  hundreds  of 
comparatively  small  American  manu- 
facltirers  and  i)r()ducers  have  had  to  com- 


14 


I' 


ii 


i\ 


CAMBRIAN    COAL  COMBINE 

(Great  Britain 


{  Cie.des  N    (?\ 
Chargeurs  K 


LEGEND 

0  Coal  Mining  Companies 

1  I  Coal  Distributing  Companies 
d?  Transportation    Companies 

I    I  Other  Companies 

Connectionthrough  common 

directors, stocK  ownershipor 
other  relations.  All  lines  from 
Lord  Rhondda  indicate 
Oirectorates. 


CHART    3 


m 


c 


pete  in  export  trade.  Moreover,  in  some 
industries  such  manufacturers  have  also 
competed  abroad  with  great  American 
companies  having  most  efficient  world- 
wide selling  organizations. 

In  various  manufacturing  industries, 
higher  manufacturing  costs  and  compara- 
tive inexperience  in  export  trade  make  it 
extremely  difficult  at  best  for  Americans 
to  compete  with  foreigners  for  trade 
abroad.  Therefore,  meeting  severe  com- 
petition from  powerful  foreign  combina- 
tions, and  through  dependence  on  foreign 
cable  and  telegraph  companies,  foreign 
banks  and  ships,  forced  to  risk  exposure 
of  the  secrets  of  their  overseas  business 
to  their  foreign  competitors  and  to  risk 
effective  discrimination  against  their  trade, 
American  manufacturers,  and  especially 
the  smaller  producers,  have  been  at  a 
decisive  disadvantage  in  export  trade. 

Foreign  Buying  Combinations  Which 
Have  Depressed  American  Export  Prices 

In  various  markets  American  manufac- 
turers and  producers  must  deal  with  high- 
ly effective  combinations  of  foreign  buy- 
ers. Thus,  exporters  of  lumber  find  such 
combinations  in  Australia  and  on  the  con- 
tinent of  Europe.  Cottonseed  products 
are  handled  by  combinations  of  buyers  in 
Holland,  Denmark,  and  Germany;  and 
Austrian  cotton-textile  manufacturers 
have  a  buying  combination  to  import 
their  raw  cotton.  The  Cooperative  Whole- 
sale Society  (Ltd.),  an  astonishingly 
comprehensive  wholesale  buying  organi- 
zation maintained  by  1,400  cooperative 
societies  in  Great  Britain,  has  one  buyer 
in  New  York  who  annually  purchases 
millions  of  dollars'  worth  of  American 
products.  Four  London  firms,  known  as 
the  Fixing  Board,  daily  set  the  price  of 
silver  for  the  world  until  March,  1919, 
and  American  mining  companies  had  to 
sell  their  silver  for  either  the  English  or 
the  great  Indian  market   to  one  of   these 


four  houses.  For  years  the  copper  trade 
of  the  world  was  ruled  by  a  vast  German 
metal-buying  organization  centering  in 
the  Metallbank  und  Metallurgische 
Gesellschaft,  (A.  G.)  of  Frankfort-on-the- 
Main.  This  combination  had  sub- 
sidiary and  affiliated  companies  in  Ger- 
many, England,  France,  Spain,  Switzer- 
land, Belgium,  Africa,  and  Australia,  con- 
trolled copper  and  lead  mines  and  smelters 
in  the  United  States,  Mexico,  and  other 
countries,  and  worked  in  agreement  with 
other  German  metal-buying  concerns. 

These  combinations  naturally  made  in- 
dividual American  producers  bid  against 
each  other,  and  were  able  to  buy  at  com- 
paratively^ low  prices.  According  to  the 
president  of  one  of  the  largest  American 
copper  companies,  the  German  metal- 
buying  combinations,  by  such  tactics  as 
these  and  by  the  manipulation  of  the 
foreign  future  markets,  bought  millions 
of  tons  of  American  copper  at  prices 
averaging,  over  a  series  of  years,  nearly 
a  cent  a  pound  below  the  prices  paid  by 
American  consumers.  This  condition  has 
changed,  since  American  producers,  now 
combined,  control  about  80%  of  the 
world's  supply  of  copper. 

Those  who  attended  the  International 
Trade  Conference  in  Atlantic  City  in 
October,  1919,  must  have  learned,  through 
the  foreign  representatives,  of  the  tendency 
to  develop  large  buying  syndicates  in 
Europe.  It  is  obvious  that  the  only  way 
in  which  to  meet  collective  buying  effecti- 
vely is  by  collective  selling. 

Diagrams  facing  pages  10,  l^  and  14 — 
for  the  use  of  which  we  are  indebted  to  the 
Federal  Trade  Commission  and  to  the 
General  Electric  Company  of  New  York 
— will  afford  an  idea  of  the  extent  of  some 
of  the  European  syndicates  and  selling 
combinations  against  which  American 
manufacturers  have  had  to  compete — 
and  will  have  to  compete  again  when  nor- 
mal conditions  return. 


15 


I 


MA- 


